Tesla’s battery technology to power homes, businesses

Tesla CEO Elon Musk is trying to steer his electric car company’s battery technology into homes and businesses as part of an elaborate plan to reshape the power grid with millions of small power plants made of solar panels on roofs and batteries in garages.

Musk, a billionaire, was expected to announce Tesla’s expansion into the home battery market Thursday evening in Southern California. He is renowned for pursuing far-out projects. For instance, colonizing Mars is one of Musk’s goals at Space X, a rocket maker that he also runs.

Although the battery will be made by Tesla, it’s expected to be sold as part of a package with a solar power system by SolarCity, a solar installer founded by Musk’s cousins, Lyndon and Peter Rive. Musk is SolarCity’s chairman and largest shareholder.

As with Tesla’s electric cars, which start around $70,000, the battery will probably be too expensive for most consumers. The system is expected to cost several thousand dollars, discouraging widespread adoption, especially for a product that may only have limited use.

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For now, the battery primarily serves as an expensive backup system during blackouts for customers like David Cunningham, an aerospace engineer from Foster City. He installed a Tesla battery late last year to pair with his solar panels as part of a pilot program run by the California Public Utilities Commission to test home battery performance.

Although Cunningham’s home has not endured a blackout in the six months that he has had the battery, it’s capable of running critical home appliances such as lights and refrigeration and can be recharged by solar panels during the day.

“As long as a person has solar panels, it’s just a natural fit for the two to go together,” Cunningham, 77, said. “I consider it to be a whole power system right here in my home.”

Cunningham took advantage of state incentives that sharply reduced the battery’s $18,300 sticker price under the pilot program. He still paid $7,500.

“The value proposition now is around reliability and backup power more than it is around savings, but over time that may change,” said Shayle Kahn, an analyst at GTM Research.

The batteries are likely to become more useful if, as expected, more utilities and regulators allow power prices to change throughout the day based on market conditions. That way, the software that controls the solar and battery system will allow customers to use their home-generated power – and not expensive grid power – when grid prices spike.

Many commercial customers already buy power this way, and Tesla was to announce battery systems designed for them, along with bigger battery packs that utilities can use to manage their grids. Analysts say these utility and commercial markets will probably be more promising for Tesla during the next few years than residential customers.

The goal is to create regional networks of home batteries that could be controlled as if they were a power plant. That would give utilities another way to ensure that they can provide power at times of peak demand.

“You have to allow the owner to unbundle the value in the battery,” said Ken Munson, CEO of Sunverge, a power storage company teaming with the solar panel maker SunPower to develop a battery service that utilities can use and potentially profit from.

Tesla is building a factory in Nevada that will begin churning out batteries in 2017, so Musk needs to begin drumming up customers. The spotlight may help Musk push policy makers and utilities to consider reshaping regulations so solar and battery storage could be easily incorporated into the larger electric system, Kahn said.

Tesla’s ambitions already have intrigued homeowners like Mike Thielen, who installed one of the prototype batteries with SolarCity panels on his Redondo Beach home last year.

“I think it’s brilliant,” he said. “I would consider upgrading to a more powerful home battery if they could figure out a way to get me totally off the grid.”